Affordable 4G Smartphones: Catalyzing Global Connectivity and Market Dynamics

Picture this scenario: Your 2012-model smartphone finally conks out. You’re free from cumbersome carrier contracts, and aren’t loyal to any specific phone brand. You’re not inclined either to splurge on the latest tech toys. You start surfing the web for a suitable replacement, expecting to shell out a tidy sum but are pleasantly surprised. For the cost of a family lunch, you can buy a decent, functional smartphone.

Once, a good phone could set you back as much as a decent laptop, but now there’s an array of Android devices ranging from $150 to $250 that make your old gadget seem like a relic.

Welcome to the era of commodified smartphones. This shift in the market isn’t just a coincidence – it’s a calculated phenomenon that’s poised to reshape software and hardware industries significantly.

Smartphone Economics 101

This evolving market landscape might seem alien to the loyal iPhone or Android power user. If you’re accustomed to using flagship phones, you perhaps rarely glance at entry-level or mid-range devices—and that’s comprehensible. The cost of securing a premium device, like an iPhone or a high-end Android smartphone, has remained consistent over the years.

However, the fierce competition in other market segments has triggered a precipitous price drop. In fact, more than a billion smartphones were shipped last year, brought to the market by a myriad of brands. With scores of vendors wrestling for the same slice of the market, average retail prices have seen significant cuts—and so have profit margins. Major vendors are feeling the crunch, and some may even be forced to bow out.

One might argue: “Doesn’t slimming margins translate into more consumer value?”

Indeed, but it also pressures phone manufacturers to sell more units either to turn a profit or to break even. This pressure becomes a problem in a mature market because smartphone penetration is already pervasive in most developed countries. However, this wave of Android commodification might just boost high-speed mobile broadband adoption in less developed countries.

When examining the smartphone market, most tend to focus on what’s under the hood – the new hardware, the operating system, the market share, and shipment numbers for various brands and platforms. Although these figures provide essential information – like how different platforms are performing and the type of hardware being launched in the market – they fail to present the complete picture.

To truly understand what sets affordable phones apart, we need to delve into additional factors:

• Bill Of Materials (BOM)
• Average Selling Price (ASP)
• Margin

Technologically, the difference between smartphones like the iPhone 5C and iPhone 6S isn’t staggering, and the same goes for the comparison between a flagship Android phone from Samsung and a basic “white box” smartphone. However, if you view these differences from an economic angle, the variance becomes profound.

Let’s set up a hypothetical scenario where Apple and Samsung launch new flagship models. The BOM for these devices will hover around the $200 mark (a fact that shocks many who learn that some of the top Android smartphones are pricier to manufacture than iPhones). The average selling price (ASP) ranges from $400 to $700; however, simply deducting the BOM from the ASP is not enough to determine the profit margin. The BOM doesn’t account for marketing costs, research and development expenses, intellectual property rights, etc. This means you could sell a device created with $200 worth of hardware for $600 and still make less than a competitor who sells $250 worth of components for $500. Traditionally, Apple enjoys the lion’s share of profit margins in this arena, with the Android clique trailing considerably.

So, what sets commoditized devices apart? It’s not the technology but economics. These devices are designed and manufactured with a budget in mind. So, consumers get around $120 worth of hardware for $150 or less. While this might not be a major selling point in developed markets, it’s an essential factor for the remaining six billion inhabitants of our planet. For these potential users, the price gap can be significant—and that’s a crucial consideration.

Budget-Friendly Android Smartphones: A Bang for Your Buck

At this juncture, you might wonder how these inexpensive phones could possibly measure up to the likes of an iPhone or a Galaxy in terms of performance. And you’d be right. However, the fact is—they don’t need to. While their pricing places them leagues apart, these budget smartphones offer an impressive value for money. Put simply, consumers can opt to pay a quarter of the price of a flagship Android device, sacrificing only about 10% of the features exclusive to high-end models. In essence, you get much more than you pay for—and, in my experience, these devices often prove to be a worthwhile investment.

Over the years, I’ve had the opportunity to test various types of hardware, both as a professional reviewer and a hobbyist. Recently, I got my hands on several budget-friendly models. The latest was an aluminum smartphone equipped with a 5.5-inch 1080p display, 4G/LTE connectivity, an octa-core processor, 2GB of RAM, 16GB of storage, a fingerprint scanner, a reasonably good 13-megapixel camera, and a substantial 4000mAh battery—all for a surprising price of $179. This isn’t an unknown, ‘white box’ product; it hails from Xiaomi, China’s leading smartphone vendor. The device sports an attractive design and comes with one of the most visually appealing Android forks in existence (MIUI).

Despite its low cost, could I genuinely consider this as my daily driver? Absolutely. Although it can’t compete outright with a new iPhone 6S or Nexus P6, it doesn’t need to. Given its price tag, it offers more than adequate functionality and then some.

When I got my first iPhone in 2009, there wasn’t much of a choice. Android was suffering through a turbulent phase, and with Android devices leaving much to be desired, I decided to give the iPhone a shot. However, I soon found myself at odds with several frustrating aspects of iTunes and Apple’s policies—a situation that had previously led me to sell my iPod. As a result, I traded my iPhone for an acceptable Android alternative as soon as one became available. While Apple has since revamped iTunes, I am not keen on returning. My gripe isn’t with the quality of Apple software or hardware, which is exceptional. It’s a matter of principle: I am not partial to devices that lock me into proprietary standards and services. Regardless of whether it’s Apple, Sony, Whirlpool, or someone else, I tend to steer clear of such products.

But what does this have to do with Apple? Or Whirlpool, for that matter?

I’ve spent a significant chunk of the past decade working for various tech news outlets, and one paradox eludes me